VAT treatment of investment management services supplied in relation to Self-Directed Life Assurance Bonds

Financial services consisting of the management of the undertakings listed in Paragraph (i)(g) of the First Schedule to the Value-Added Tax Act 1972, as amended, qualify for exemption from VAT. Clause (II) of that paragraph specifically provides for the exemption to apply to the management of a collective investment undertaking administered by an authorised life assurance company. Some uncertainty has arisen as to whether the management of Self-Directed Life Assurance Bonds (SDBs) comes within the ambit of the VAT exemption provided by that Clause.

SDBs are life assurance products that are personal to the policyholder. Some of these funds have the characteristics of what are regarded as Personal Portfolio Policies (also known as wrappers) as outlined in Section 730BA of the Taxes Consolidation Act 1997, as amended. Following an examination of the issues involved and discussions with industry representatives, Revenue can confirm that the VAT exemption applies only to the management of SDBs, which would not be treated as Personal Portfolio Policies for the purposes of that section. In general, therefore, in order for the management of an SDB to qualify for VAT exemption it must meet the following criteria:

• The manager must have full delegated authority, and
• The assets included in the product must be available for investment in by the general public.

In essence, this aligns the VAT treatment of SDBs with their treatment for the purposes of the gross roll-up tax regime provided for in Chapter 5 of Part 26 of the Taxes Consolidation Act, 1997 Act, as amended. The management of SDBs, which are not subject to the higher exit tax provided for in Section 730F of that Act, will qualify for exemption from VAT under Clause (II) of paragraph (i)(g) of the First Schedule to the Value-Added Tax Act 1972, as amended.